No Tip? Restaurant Keeps Servers' Gratuities, Gets Slapped With Six-Figure Fine

Zinger Key Points
  • A North Carolina restaurant is being forced to pay back staff that it kept tips from.
  • The restaurant took tips to offset credit card fees, according to a report.
No Tip? Restaurant Keeps Servers' Gratuities, Gets Slapped With Six-Figure Fine

Patrons at sit-down restaurants pay for their meals and typically leave something extra for their server, known as a gratuity or a tip. One restaurant decided to keep the tips from staff and faces a big fine.

What Happened: North Carolina-based “Jay’s Kitchen” was ordered to pay $157,287 to staff members after an investigation found the restaurant violated the Fair Labor Standards Act.

The restaurant owner, Mugen Inc., “denied the workers their full wages by keeping portions of their earned tips.”

See Also: A North Carolina Chick-fil-A Tried To Pay Workers In Food - The Reactions Were Exactly What You'd Expect

The six-figure fine will be split among 65 affected staff members at the restaurant that specializes in Asian-American cuisine.

Jay’s Kitchen was also found in violation of child labor and recordkeeping laws.

The fines and ruling came from the U.S. Department of Labor, according to Business Insider. 

“Tipped workers in the food services industry rely on their hard-earned tips to make ends meet,” Department of Labor District Director Richard Blaylock said. “Tips are the property of the worker and, under no circumstances, may employers keep any part of their employees’ tips.”

The child-labor laws violations came from three 15-year-old workers who worked more hours in a day, a school week and past certain hours than rules allow. Fines for the child-labor laws were $1,915.

Mugen, which owns five other restaurants across North Carolina, told Business Insider that it “fully and completely cooperated” with the investigation.

Why It’s Important: The federal minimum wage is just $7.25 per hour.

According to the report, the restaurant owner said they were taking credit card service fees for the tip amount out of servers’ wages.

“This error resulted in some of our tipped employees not getting the full amount of tips that they were due,” the restaurant owner said.

See Also: Darden Restaurants' Portfolio Is Better Positioned Than Most, Says This Analyst

The restaurant industry has faced a shortage of workers as they seek employment in different sectors, including work-from-home jobs or ones that pay better than tipped wages. Stories like this one might not help improve the restaurant industry.

The sector is also among the hardest hit sectors from the lingering impact of COVID-19 shutdowns and it currently struggles to find workers.

Image: Shutterstock

Posted In: Covid-19Department of LaborU.S. Department of LaborNewsRestaurantsSmall BusinessGeneral